Debt in Private-Equity Deals
May Pose Risks to Investors

The past few months have been good to private-equity investors, thanks to the continued generosity of the debt markets.

Private-equity funds, backed by institutions and wealthy individuals, take controlling stakes in companies, often using heavy chunks of debt to do the deals. In recent months, private-equity funds have added more debt to the debt-laden companies they control, primarily to pay themselves dividends on their...